Pittsburghers know that the times are out of joint. Somehow they're expecting the prosperity to blow up in their faces.
Fortune Magazine, 1941

Sunday, May 15, 2016

Um, building permits in the city of Pittsburgh anyone?

I know things are quiescent here, but somebody out there ought to have noticed this. I'll skip the preamble and go right to the bottom line (up front, as it were). Check out the latest data point in this annual time series total units in residential building permits for the City of Pittsburgh.

Let that last # sink in for a minute. If correct then there is big news in that little spike for 2015? That or at least a sign the local hagiography industry is sputtering? More than that, it is potentially quite a historic number. Why? The bulk of that number comes from 9 potential buildings with 100+ units each on average, something that has likely not been planned within the city for an undetermined period of time. I will hazard a presumption that residential building permits were not exactly jumping off the charts through the 70s and 80s - a period when the city's population was dropping pretty rapidly - you might have to go back several decades at least to find a comparable level of new (potential) residential construction.

It is one of those metrics that means more or less than may seem obvious. This all is from data collected by the Census Bureau on residential construction permits, so theoretically a great leading indicator of construction activity in the near future. The huge spike in building permits issued in 2015 could be indicative of a lot of new units coming online soon, and possibly of a population spike (spike-let? if that is a word) to fill said units. If you look back over the last 20 years, the next two largest numbers (367 in 1999 and 641 in 2002) each reflected notable events in Pittsburgh real estate history. One is likely for plans for the initial Summerset development and the earlier Downtown residential units that boomed in the new century, respectively.

OK, deep breath.

One huge caveat (yes all real data has caveats, live with it) that may at the very least make the spike less extreme in context than it appears.. This data is self-reported by individual municipalities, so it really just reflects data the city of Pittsburgh sends to the Census folks each year. The data has a breakdown of building permits issued by size of structure and also the total estimated construction value. I have pointed out in the past the curious anomaly that the data for the city of Pittsburgh showed zero new building permits for multi-unit buildings with 4 or more units for any year between 2005 and 2013. Since casual observation can come up with examples to dispute those zero values, so you have to assume something was amiss in the data itself. I think the city kind of missed reporting building permits on larger construction for many years, even though the data should have been included.. I also think that datum of 100 for 2013 is revised and a bit to round for me - wortth checking, You can read some of my musings on this issue in this old post here. Others have opined that the building permits in the city also not reflect renovation activity leading to new habitable residential units as well. So some of the past data may not be as low as it appears, but it is hard to imagine the reality gets close to that 2015 data no matter.

So take it all, like all extreme data points, with a grain of salt, but still at the end of the day it is hard to miss that 2015 is a big number compared to any year in the past. Even if all those units don't actually get built, is the filing of so much construction activity an economic metric of note for the city unto itself?

See, I didn't make you read all the way to the end to get to the punch line. There is a secret question however? Why was I even looking at this data this week?

3 Comments:

Ooh, ooh, I think I may know this one. Is it because the Census uses housing unit data to attribute its county population estimates to the subcounty level (including cities like Pittsburgh), and those subcounty population estimates are due to be reported to their embargo site on 5/17, public release 5/19?

Anyway, I have no idea what has been going on with the reporting, but obviously there has been at least a boomlet in multi-family in the City going on well before this. So the trend should be smoother, although if it was higher than ever (in the modern era) in 2015, I certainly would not be surprised.

One observation--I don't know how this is reflected the housing unit data, but some of the real-world new units in the City have been associated with new affordable housing projects. For example there is a big ongoing project in Larimer right now, and Addison Terrace is being replaced with the new Skyline Terrace, and there was just an announcement that Trek is going to be the developer for the Mellon's Orchard project in East Liberty, and so on.

The population implications of all this are complicated. In many cases, a lot of units theoretically on the books are being removed, sometimes on a net basis (meaning even including the planned new units). However, vacancy rates were often high in the old units. Moreover, these new projects are mixed-income, mixed-use, and just nicer in general, and part of the hope is that they will help revitalize the surrounding neighborhoods.

So, the net population effects could ultimately be positive. But at the minimum, it is a more complicated story than just a brand new market rate building going up in a brownfield or former parking lot.

This anomalous 2015 data for building permits is not likely to impact the 2015 population estimates. Next year it should factor in. I saw it when looking up the 2014 building permits, which were themselves higher than typical, still come in less than a proportional # within the county. Given the jump in population loss for the county in the data, it seems likely that the city population estimates will show a loss of 1-2K. But I could be wrong.

what goes in the data, given the curious history of the city's data on this, is hard to say. Depends on how the development is structured if any one project should be included. Anything other than new publicly owned units ought to be factored into the data submitted, but does not seem like it always has been. also for some projects, the building permits may come in longer than in others before you see construction happening, yet alone occupancy.